By William L. Watts, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks trimmed gains but were
still set to end a record-breaking 2013 on a high note, with the
Dow Jones Industrial Average and the S&P 500 venturing further
into uncharted territory as the blue-chip index remained on track
for its largest annual percentage gain since 1995.
The S&P 500 (SPX) was up 1.74 points, or 0.1%, at 1,842.81,
contributing to a 29.2% rise for the year and leaving it on track
for its largest annual percentage jump since 1997.
The Dow industrials (DJI) remained up 16.20 or 0.3%, to trade at
16,520.49, a day after the index notched its 51st record close of
2013. The blue chips are on track for an annual rise of more than
26%.
The Nasdaq Composite (RIXF), meanwhile, advanced 12.74 points,
or 0.3%, to 4,166.66 The index is up more than 38% over the course
of 2013, which would be the biggest rise since 2009.
The strength of the 2013 rally caught most market
prognosticators by surprise.
The previous year saw investors fretting over numerous events,
from the presidential election to the impending fiscal cliff and
Europe's debt crisis. With the election in the rearview mirror,
policy makers averting a disastrous fiscal mistake and Europe
appearing to be slowly on the mend, the stock market in 2013 likely
captured some of the returns that would otherwise have been
produced in 2012, said Stuart Freeman, chief equity strategist at
Wells Fargo Advisors in St. Louis.
The S&P 500 advanced 13.4% in 2012, according to
FactSet.
While the market's strong finish into the end of the year has
investors worrying that a pullback may be overdue, Freeman sees
little threat for a January pullback. Fourth-quarter earnings are
likely to top expectations and the market seasonally performs well
in the January-to-May period, in part due to flows to retirement
accounts.
Investors in 2014, however, are likely to see a "bumpier ride,"
he said.
"Our position is the year will bring a much more moderate return
and more volatility," Freeman said.
Meanwhile, U.S. economic growth and job creation appear likely
to continue slowly gaining momentum, providing room for increased
capital spending, while a further recovery in Europe will also aid
large-cap firms with heavy international sales exposure, he
said.
Freeman said he expects large-cap cyclicals to take over
leadership in 2014 after outperformance by mid- and small-cap firms
in 2013. Wells Fargo has overweight recommendations on the
industrial, consumer discretionary and technology sectors, while
underweighting utilities and health care.
Volume remained light on Tuesday. Stocks are putting in a full
day of trading, but markets will be closed Wednesday for New Year's
Day.
Economic data provided a little fodder in early action. Stocks
extended gains Tuesday morning after the Conference Board said its
consumer confidence index rose more than expected to 78.2 in
December from a revised 72 in November.
"Rising equity markets, improving labor market conditions,
rising home values and relative stability in Washington has
consumers feeling more optimistic as we turn the corner into 2014,"
said Lindsey Piegza, chief economist at Sterne Agee.
"Of course optimism can only go so far. Eventually that euphoric
feeling will have to be supported by sustainable job and income
growth in order to sustain the heightened growth and spending
levels a +75 confidence reading implies," Piegza said, in a
note.
Earlier, stock-index futures were little budged by a 0.2% rise
in the Case-Shiller home-price index for October. Stocks trimmed
gains slightly but remained in positive territory after the Chicago
Business Barometer, a gauge of business activity in the region,
fell more than expected in December but remained strong
overall.
The index dropped to 59.1% in December from 63% a month earlier.
Economists had expected a reading of 61%. Any reading above 50%
indicates expansion.
Among blue chips, American Express Co. (AXP) rose 1%, while
Cisco Systems Inc. (CSCO) added 0.7% to lead the Dow higher.
Boeing Co. (BA), followed by American Express (AXP), have been
the top Dow performers in 2013, with Boeing up more than 80% since
the beginning of the year and American Express adding more than
57%.
Shares of streaming movie-rental firm Netflix (NFLX) slipped
0.4% after the firm said Chief Executive Reed Hastings would get a
50% raise in 2014. Read: Netflix saying goodbye to Titanic, the
Killer Klowns and a pre-Ferris Matthew Broderick.
Shares of Hertz Global Holdings (HTZ) gained more than 10% after
the car-rental company said it would adopt a so-called poison pill
aimed at barring investors from collecting a controlling stake in
the company.
Twitter Inc. (TWTR) was on the rebound after a two-day slide,
rising 4.3% after tumbling more than 5% Monday and 13% on Friday.
The sharp pullback came after a downgrade Friday by Macquarie
analyst Ben Schacher. Twitter, which made its trading debut in an
initial public offering last month, remains up more than 50% since
the beginning of December.
More news from MarketWatch:
Case-Shiller: Home prices up, but boom fading
U.S. and China: When the giants unwind
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